Turmoil Deepens in Latin America as Paraguay's Congress Smolders

Paraguay’s President Horacio Cartes proudly watched Friday morning as children handed out gifts to visiting central bankers and finance officials in Asuncion, a rare moment in the spotlight for one of South America’s smallest nations.

Twelve hours later, Paraguay was still attracting attention, but for the wrong reasons as violent protests followed the senate’s unexpected approval of a bill allowing Cartes to stand for re-election. One person died as demonstrators stormed the congress building in the nation’s capital, and set it ablaze.

The incident was the latest example of how political turmoil is returning to Latin America. Earlier this week, Venezuela’s Supreme Court declared the National Assembly illegal and assumed its powers -- before suddenly reversing course on Saturday following an international outcry. In Brazil, unrest is bubbling as President Michel Temer pushes through an unpopular pension reform, while in Ecuador, which will choose a new president on Sunday, the opposition candidate was attacked after leaving a soccer stadium.

“Many of these institutional defects -- corruption, power-hungry presidents, and checks and balances that were poorly equipped to do either -- were evident for years,” said Christopher Sabatini, a professor of international policy at Columbia University. “People’s patience has run thin” as governments struggle to meet expectations amid slower economic growth, he said.

Wobbling Democratic Norms

Facing international pressure, both Paraguay and Venezuela appear to be backing down on Saturday from the unpopular measures that sparked the crises.

Yet wobbling democratic norms in parts of Latin America have coincided largely with worsening economic performance. The region’s GDP contracted in both 2015 and 2016 following average growth of 3.6 percent the five previous years. Meanwhile, presidents from Mexico to Argentina have seen their popularity drop. Disapproval of Brazil’s Temer jumped to 73 percent in a recent poll, while Chilean President Michelle Bachelet’s favorable rating fell to 23 percent.

Paraguay, which last week sold $500 million of bonds to overseas investors and has been upgraded by Moody’s Investors Service and Standard & Poor’s in recent years, seemed to be a bright spot. The country passed economic reforms to attract investment and lure manufacturing from Brazilian companies eager to reduce costs. Its GDP surged by an average of 6.5 percent annually from 2010 though 2015, according to the World Bank.

Finance Minister Santiago Pena said Saturday that investors would overlook the “atypical” unrest and that a lasting economic impact was unlikely.

Blaze Extinguished

On Saturday, firefighters extinguished the blaze in Asuncion and the annual meeting of the Inter-American Development Bank, which attracted officials from across the region, continued as planned. Members of Paraguay’s lower house pledged not to take up the senate’s measure to allow Cartes to seek re-election, and the president called for calm while blaming “those who want to destroy democracy” for setting the congressional building ablaze.

Cartes, president since 2013, is scheduled to leave office next year. The bill would have allowed him to seek another five-year term. Paraguay’s constitution has prohibited its leaders from seeking re-election since it was passed in 1992. The measure followed in the aftermath of the dictatorship of General Alfredo Stroessner, who ruled the land-locked nation from 1954 to 1989.

Fearing Dictatorship

Meanwhile, Venezuela’s top court, which is allied with President Nicolas Maduro, said in Saturday’s about-face that the opposition-controlled National Assembly will retain its powers, and its lawmakers still have legislative immunity from prosecution. The region’s largest nations had all criticized the court’s earlier move, and analysts labeled it a step toward dictatorship.

Hundreds of protesters marched in Caracas on Saturday, taking over the city’s main highway, to condemn the court’s initial ruling and demand all members of the court resign and be replaced. Talks between Maduro’s government and the opposition to release political prisoners and hold early elections have stalled in recent months.

Argentina’s Foreign Relations Minister Susana Malcorra, speaking with counterparts from Brazil, Paraguay and Uruguay, said Venezuela’s reversal was the result of international pressure. Members of the Mercosur customs union called on Caracas to ensure the separation of powers and warned that the national assembly’s autonomy remains limited.

Elsewhere, corruption scandals that have buffeted Brazil for years have spread across the region and threatened to destabilize governments and companies in neighboring Colombia and Peru, after construction giant Odebrecht SA revealed to U.S. authorities that it oversaw a regional graft network that paid officials in exchange for contracts.

Leftist Versus Banker

Sunday’s election in Ecuador, meanwhile, pits a candidate who would continue a decade of left-leaning populism against a banker who’s pledged lower taxes and open up the economy. People identified as supporters of the ruling party attacked opposition candidate Guillermo Lasso at a Quito stadium on March 28, forcing him to take refuge in a nearby shopping mall.

In Mexico, the unpopular government of President Enrique Pena Nieto is dealing with fugitive governors accused of pilfering state funds, while U.S. President Donald Trump has threatened to slap tariffs on Mexican goods and rip up the North American Free Trade Agreement. An increase in fuel prices has also angered Mexicans, helping opposition figure Andres Manuel Lopez Obrador, who’s questioned Pena Nieto’s signature measures to overhaul public education and open the energy sector to foreign investment, take a lead in opinion polls ahead of the 2018 presidential election.

“It’s difficult to see how these institutions and economic reforms can turn a corner when economies remain sluggish or still in decline and political frustration has grown,” said Sabatini, the Columbia University professor. “Not to be a doom-sayer, but it will likely be a bumpy ride for the next couple years for Latin American democracy.”

— With assistance by Fabiola Zerpa, Andrew Rosati, Noris Soto, and Charlie Devereux